Caffeinated Capital Files To Raise $225 Million Across Two New Funds

If you’re like many folks, you start the day with a hot cup of coffee, tea, or another stimulating beverage to get things going on the right foot. After a lovely long weekend in the U.S., it appears as though folks at the Securities and Exchange Commission have done the same.

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This morning, two regulatory filings from Caffeinated Capital posted to the SEC’s website, each indicating that the San Francisco-based VC firm intends to raise fresh capital. Here are the key details:

• Caffeinated Capital Fund III, LP would be the firm’s third flagship fund and is targeting $75 million in assets under management, according to its filing.
• Caffeinated Capital Opportunity Fund II, LP is, as the name may suggest, the firm’s second so-called “opportunity fund” and is set to raise $150 million, per its filing.

Neither of these two new funds have closed LP capital yet, at least according to their respective filings.

Since firms’ flagship and opportunity funds are two different beasts, let’s tackle each in turn.

Caffeinated Capital’s Third Flagship Fund

At $75 million, Fund III would be Caffeinated Capital’s largest flagship fund to date. According to prior filings, the firm targeted $15 million for Fund I and $50 million for Fund II.

According to financial advisory disclosure forms filed by Caffeinated Capital in late March 2018, the then-current gross asset value (GAV) of the first flagship fund was approximately $45.2 million, a more than two hundred percent return (in GAV terms) on principal of $15 million in the five years since its inception.

There are many ways to refer to a VC firm’s main funds—flagship and primary are also accurate descriptors—but regardless of label, it’s through these investment vehicles that fund managers drive the firm’s investment strategy.

According to the firm’s rather spartan website, Caffeinated Capital is “an early-stage venture capital firm” that “typically partner[s] with founders at the inception stage and invest throughout the life of the company.” And such statements would lead one to believe that the bulk of the firm’s investments would be at seed or Series A. This is borne out by the firm’s known deals in Crunchbase, a visualization of which can be found below.

What’s not pictured in the chart above is that Caffeinated Capital tends to follow on its investments. And it often does so for several rounds past its initial capital commitment.

Caffeinated Capital’s Second “Opportunity” Fund

Much like its third flagship fund, Caffeinated Capital’s second opportunity fund is its largest to date at $150 million. The firm’s first opportunity fund, first filed for in April 2016, was set to top out at $75 million.

“Opportunity” or “growth” funds are typically raised by early-stage venture investors to primarily invest in the best-performing portfolio companies from a prior fund. Canonical examples of such funds are the first Union Square Ventures Opportunity Fund or Foundry Group’s “Select” series of funds, the strategy of which Brad Feld explained in a detailed post back in 2014.

For the purposes of follow-on investing, growth or opportunity funds present an alternative to raising special purpose vehicles (SPVs). Caffeinated Capital has raised a number of SPVs in the past to invest in prior portfolio companies like WePay and Airtable.

Good News For Solo GPs

Caffeinated Capital appears to be a one-partner shop led by investor Raymond Tonsing. The fact that he is set to raise a couple hundred million dollars, on top of the more than $140 million he has raised for prior primary and opportunity funds, speaks to the firm’s track record and his LPs’ willingness to commit serious capital to solo GPs.

Image by Irene Coco on Unsplash